Apple Presents Findings to Feds

Apple Computer's lawyers met with federal prosecutors about stock option backdating, one day before the company announced it had "serious concerns" about the actions of two former officers.

By Justin Scheck and Petra Pasternak|October 05, 2006 at 12:00 AM

X

Share with Email

sending now...

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

A day before Apple Computer publicly announced results of an internal investigation over stock option backdating, the company’s lawyers held a meeting with federal prosecutors in San Francisco to spell out what they’d found.

Lawyers for Apple wouldn’t comment on Tuesday’s meeting with the feds. “I really can’t say anything about it,” said John Potter, the partner at Quinn Emanuel Urquhart Oliver & Hedges who conducted Apple’s internal investigation for a board committee. And George Riley, a partner at O’Melveny & Myers who represents the company, was similarly taciturn. “To be clear: we have no comment on the story,” he wrote in a Wednesday e-mail.

Apple publicly revealed Wednesday that 15 option awards between 1997 and 2002 “appear to have grant dates that precede the approval of those grants,” according to
a public document filed with the SEC.

The company’s CEO, Steve Jobs, apparently “was aware that favorable grant dates had been selected” but was unaware of the accounting ramifications and didn’t personally benefit, the filing said. Board member and former CFO Fred Anderson resigned, it added.

The investigation also raised “serious concerns regarding the actions of two former officers in connection with the accounting, recording and reporting of stock option grants,” the company said in the filing, though it did not specifically name any executives. “The company will provide all details regarding their actions to the SEC.”

Apple is one of dozens of companies under government investigation for stock option backdating. Because of the central role general counsel often play in the issuance of stock options, they have been at particular risk in backdating probes. In August, federal prosecutors in Brooklyn charged former Comverse GC William Sorin for his role in backdating at that company. That same month, McAfee Inc. said it received a subpoena relating to the firing of its general counsel, Kent Roberts.

Longtime Apple GC Nancy Heinen left the company earlier this year for undisclosed reasons.
She subsequently retained Cristina Arguedas, the top Bay Area criminal attorney who is also representing former Hewlett-Packard General Counsel Ann Baskins.

Arguedas would only say Wednesday that “Nancy Heinen has had a long career, and is a well-respected lawyer in Silicon Valley, and is well-known for her integrity.”

Read The Recorder‘s roundup of the stock-option backdating scandal. There won’t be a test later … but there might be a subpoena.

Reached Wednesday afternoon, Heinen likewise declined to comment. “I’m in the grocery store, I’m not gonna talk,” she said with a small laugh.

A spokesman for the Northern District U.S. attorney’s office declined to comment on the Apple investigation.

The plaintiff bar immediately descended on Apple after the company first announced it had stock option problems at the end of June. A derivative suit filed in U.S. district court in San Jose does not name Heinen as a defendant, however.

But Jeffrey Krinsk, name partner at San Diego’s Finkelstein & Krinsk, said his firm plans to name Heinen in another derivative class action as an officer who had either been a recipient of backdated stock options, or who had known about Apple’s practices. The firm plans to file in state court by the end of the week.

“We believe there’s liability directed at her for her acts and practices in connection with backdating,” Krinsk said.

Learn how your firm can apply technologies such as intelligent automation and AI across the entire client lifecycle to win more business, operate more profitably, and deliver higher levels of client satisfaction.

Premium Subscription

With this subscription you will receive unlimited access to high quality, online, on-demand premium content from well-respected faculty in the legal industry. This is perfect for attorneys licensed in multiple jurisdictions or for attorneys that have fulfilled their CLE requirement but need to access resourceful information for their practice areas.

Team Accounts

Our Team Account subscription service are for legal teams of four or more attorneys. Each attorney is granted unlimited access to high quality, on-demand premium content from well-respected faculty in the legal industry along with administrative access to easily manage CLE for the entire team.

Bundle Subscriptions

Gain access to some of the most knowledgeable and experienced attorneys with our 2 bundle options! Our Compliance bundles are curated by CLE Counselors and include current legal topics and challenges within the industry. Our second option allows you to build your bundle and strategically select the content that pertains to your needs. Both option are priced the same.

From Data to Decisions

Exclusive Depth and Reach.

Legal Compass includes access to our exclusive industry reports, combining the unmatched expertise of our analyst team with ALM’s deep bench of proprietary information to provide insights that can’t be found anywhere else.

Big Pictures and Fine Details

Legal Compass delivers you the full scope of information, from the rankings of the Am Law 200 and NLJ 500 to intricate details and comparisons of firms’ financials, staffing, clients, news and events.

KAHN GORDON TIMKO & RODRIQUES, P.C.

NORRIS MCLAUGHLIN

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters.
Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss.
Tailored just for you. In your inbox. Every day.